2020 was a year packed with noteworthy happenings in the field of digital assets. From the rapid development of CBDCs, to the advancement in regulation and institutional investments, etc. Let’s take a closer look at the main trends that took place in crypto
Central Bank Digital Currencies
Last year, we witnessed a lot of progress in this field, with many countries taking part in the race to make their own CBDC.
Among major economies, China has been in the lead, launching
extensive pilot programs for its digital yuan, and
preparing regulation. Other regions, like the US, the UK, and the EU are still in the early stages regarding CBDC development, but are progressively looking into this matter. The EU is particularly determined about its digital euro project that may already
be underway within the first half of 2021.
Given the potential benefits of digital assets and the havoc that COVID wrought on the world economy, it's not all that surprising that central bank digital currencies caught the eye of many countries around the world as a way to potentially boost their
Institutional Investment In Crypto
It can be safely said that 2020 was the year when institutional investment into crypto truly took off. According to Bitcoin Treasuries, by now there is over 1,2 million BTC held by institutional investors - which accounts for almost 6% of the total circulating
According to our observations, the base of CEX.IO’s corporate clients has significantly grown in 2020. During some periods, the overall turnover from them went up 30% compared to 2019.
The reason for this tremendous jump in the interest towards Bitcoin from institutionals lies with the general market. Traditional safe assets have been in a worldwide crisis, providing limited returns to investors, which were consumed by inflation. And so
institutional investors had to look for alternative ways to store their value. Bitcoin was there, functioning as a safe haven with significant growth potential as an asset.
Bitcoin’s Surge and a New All-Time High
Despite the overall harshness of 2020, Bitcoin has achieved some impressive progress last year. On January 8, 2021 BTC price had achieved a new all-time high at the exchange rate above $41,000.
While a part of this growth can be attributed to Bitcoin’s halving that took place in May 2020, much of its success last year comes from the rising investments (especially among institutionals) and the overall development of the crypto industry.
Back in 2017, the crypto industry was rather unregulated, which led to an abundance of cybercriminals and scam projects that sought to take advantage of it. In order to protect investors, regulators had to take a more active interest in this field and have
been putting effort ever since.
By now, many jurisdictions have then created solid regulatory frameworks to deal with the crypto industry. For example, just earlier this month, a ban on the sale of digital currency derivatives to retail investors has officially gone into effect. This was
due to the Financial Conduct Authority deeming them unsuitable for retail customers because of the potential harm they could pose.
While stricter regulation comes with more responsibilities for businesses, it also helps build trust and protect participants of this market. Regulation ensures that risks presented to users are kept at reasonable levels. And it also acts as an encouragement
for projects in this market to mature, innovate and move forward.
While decentralized finance originated in 2018, it was in 2020 that this field saw massive growth, with many institutional investors flocking to this field. DeFi created an alternative, more transparent way for investors to access financial products and
services. It erased the need to deal with paperwork or third parties, and provided a way of generating passive income for cryptocurrency holdings, which many investors came to love. This was the reason for its progressive rise.
According to CEX.IO data, in October-November, the number of requests from institutional clients for DeFi tokens increased by tens of millions of dollars ($30-40M) per week, as people wished to benefit from price dynamics.
Conclusion: 2020 Was A Very Good Year For Crypto
2020 proved to be an excellent year for crypto - we saw a major spike in interest. During the cryptocurrency rally in December, CEX.IO platform has seen a significant increase in the usage of ETH. And considering the ongoing turmoil in the global economy,
this shift is likely permanent.
With the increasing interest from governments, the progressive regulation across the world and the growing interest of institutionals, it is likely safe to say that we will see the crypto market only mature more in the future.